Consumption-based capital asset pricing model

The consumption-based capital asset pricing model (CCAPM) is used in finance and economics as an expansion of the capital asset pricing model (CAPM). The CCAPM factors in consumption as a means of understanding and calculating an expected return on investment.

The CCAPM implies that the expected risk premium on a risky asset, defined as the expected return on a risky asset less the risk free return, is proportional to the covariance of its return and consumption in the period of the return.

References

• Investopedia "Consumption Capital Asset Pricing Model - CCAPM". Retrieved on 2006-11-04..
• Investopedia "Catch On To The CCAPM". Retrieved on 2006-11-04..

References